TaxTMI 
TaxTMI 
2022 (1) TMI 1022
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....n to the book profit. We shall adjudicate the above issues as under: Disallowance u/s 14A of the I.T.Act while computing book profit u/s 115JB of the I.T.Act (grounds 2 to 8) 3. The CIT(A) had deleted the addition of Rs. 108,80,99,122 for the purpose of computation of book profit u/s 115JB of the I.T.Act, by observing as under:- "5.2 The assessing officer (in paragraph 5 of the assessment order) added back the expenditure relatable to exempt income to the profit as per profit and loss account to work out the book profits u/s.115JB of the Act observing that the CIT(A) deleted the addition on the technical ground that the Ad has not recorded his dissatisfaction of the Appellant's claim (that no expenditure was incurred in connection with the earning of exempt income) having regard to the accounts of the assessee. The undersigned vide order dated 26 March 2018 deleted the addition u/s.14A with the following observations: 7.4 The submissions of the appellant were considered. The value of tax free investments was Rs. 721.50 Cr (As on 31.03.2013). Since the interest free funds far exceeded the tax free securities, no disallowance can be made in respect of i....
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....0-2011 (Karnataka High Court) (ii) CIT v. Gokaldas Images Pvt. Ltd. (2020) 429 ITR 526 (Kar.) (iii) Sobha Developers Ltd. v. DCIT (2021) 125 taxmann.com 72 (Kar.) 3.3 We have heard rival submissions and perused the material on record. The Hon'ble jurisdictional High Court in the case of CITv. Gokaldas Images Pvt. Ltd. (supra) had held that while computing the book profits, the disallowance u/s 14A of the I.T.Act cannot be added. It was held by the Hon'ble High Court that any disallowance computed u/s 14A of the I.T.Act pertain to the computation of income under the normal provisions of the Act and it cannot be read into the provisions of section 115JB of the I.T.Act. The Hon'ble High Court was considering the following substantial question of law:- "Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the disallowance made under section 14A should not be added to the Book Profits of the assessee under section 115JB despite the explicit provisions of Clause (i) of Explanation (1) to section 115JB? 3.4 In deciding the above substantial question of law, the Hon'ble High Court has held as follows:- ....
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....y to every assessee, being a company, mentioned in this section. 7. Thus from perusal of the relevant extract of Section 115JB, it is evident that Sub-Section (1) of Section 115JB provides the mode of computation of the total income of the assessee and tax payable on the assessee under Section 115JB of the Act. Sub-Section (5) of Section 115JB provides that save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee being a company mentioned in this Section. Therefore, any expenditure relatable to earning of income exempt under Section 10(2A) and Section 10(35) of the Act is disallowed under Section 14A of the Act and is added back to book profit under clause (f) of Section 115JB of the Act, the same would amount to doing violence with the statutory provision viz., Sub-Section (1) and (5) of Section 115JB of the Act. It is also pertinent to mention here that the amounts mentioned in clauses (a) to (i) of explanation to Section 115JB(2) are debited to the statement of profit and loss account, then only the provisions of Section 115JB would apply. The disallowance under Section 14A of the Act is a notional disallowance and there....
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....ances in the balance sheet on the assets side. The relevant finding of the CIT(A), reads as follows:- 5.10 It is submitted that the appellant bank had debited an amount of Rs. 928,11,93,007/- towards Provision for Non Performing Advances and reduced the same from the Gross Advances (asset side) while preparing the Balance Sheet. Therefore, it has to be treated as write off and not as provision for diminution in value of asset. The Appellant bank also furnished the following working in support of the claim that the provision for bad and doubtful debts to the extent of provision debited in the profit and loss account was reduced from the Gross advances in the balance sheet on asset side. 5.11 From the above working, it is found that the provision of Rs. 928.12 crores was debited to the P& L account and also reduced from the Gross advances in the balance sheet on the asset side. In view of the various judicial decisions discussed above, the assessing officer is hereby directed to verify and delete the addition made to the book profit u/s 115JB." 4.3 The Revenue being aggrieved, has raised this issue before the Tribunal. The learned Departmental Representative supp....
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....ances and computed income under the regular provisions of the Act. The A.O. also computed book profit u/s 115JB of the I.T.Act by making certain adjustments. Against the said assessment order, the assessee preferred an appeal before the first appellate authority. The appeal was disposed of by the first appellate authority vide order dated 26.03.2018. The Assessing Officer passed order on 30.05.2015 to give effect to the order of the first appellate authority. In the order giving effect to the order of the first appellate authority (order dated 30.05.2018) the Assessing Officer recomputed the book profits u/s 115JB of the I.T.Act by making various additions, which according to the assessee was not part of either the original assessment order nor the appellate order. The Assessing Officer added the following to the book profits u/s 115JB of the I.T.Act while giving effect to the order of the first appellate authority:- Sl. No. Nature of addition Amount 1. Disallowance u/s 14A r.w.s. 8D 108,80,99,122 2. Provision for NPA 928,11,93,007 3. Net depreciation on investments 52,57,75,606 5.1 Being aggrieved by the order of A.O. dated 30.05.2018, the as....
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....ssed by the A.O. u/s 143(3) r.w.s. 250 of the I.T.Act, the A.O. has recomputed the book profit u/s 115JB of the I.T.Act by making various additions, which were not part of either the original assessment order nor the first appellate order dated 26.03.2018. Therefore, the assessee had challenged the action of the Assessing Officer before the CIT(A), stating that the A.O. had exceeded his jurisdiction while giving effect to the order of the CIT(A). The assessee has also raised grounds on merits with regard to addition of net depreciation on investments amounting to Rs. 52,57,75,606. We noticed that these grounds taken by the assessee before the CIT(A) has not been adjudicated in the impugned order dated 11.03.2019. Therefore, we restore these issues to the files of the CIT(A). The CIT(A) is directed to adjudicate the issues raised in grounds 2 and 3 before the Tribunal [ground 2, 2.1 and 3.5 before the CIT(A)]. The CIT(A) is directed to afford reasonable opportunity of hearing to the assessee. It is ordered accordingly. 6. In the result, the appeal filed by the assessee is allowed for statistical purposes and the appeal filed by the Revenue is dismissed. Order pronounced on thi....